ITO, WD-36(1), KOLKATA, Kolkata V. Sri Rajesh Agarwal, Kolkata

ITA 6/KOL/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1357 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 01-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S L
• Assessee Lawyers: SAURABH KUMAR
• Keywords: Assessment record; Tax effect; Reassessment proceedings
• Section: 44AD

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM & SHRI M.BA LAGANESH, AM] I.T.A NOS. 6 TO 9/KOL /2016 ASSESSMENT YEARS : 2007- 08 TO 2010-11 I.T.O., WARD-36(1) -VS- SHRI RAJESH AGARWAL KOLKATA KOLKATA [PAN : ADHPA 3042 Q] (APPELLANT) (RESPONDENT) I.T.A NOS. 24 TO 26/K OL/2016 ASSESSMENT YEARS : 2008- 09 TO 2010-11 SHRI RAJESH AGARWAL -VS.- I.T.O., WARD-36( 1) KOLKATA KOLKATA [PAN : ADHPA 3042 Q] (APPELLANT) (RESPONDENT) FOR THE ASSESSEE : SHRI SAURABH KU MAR, ADDL. CIT FOR THE RESPONDENT : SHRI ANIL KOCHAR, ADVOCA TE & SHRI S.L.KOCHAR DATE OF HEARING : 21.09.2017. DATE OF PRONOUNCEMENT : 04.10.2017. ORDER PER N.V.VASUDEVAN, JM ITA NOS. 24 TO 26/KOL/2016 ARE APPEALS BY THE ASSES SEE WHILE ITA NOS.7 TO 9/KOL/2016 ARE APPEALS BY THE REVENUE. THESE APPEAL S ARE FILED AGAINST THREE DIFFERENT ORDERS OF CIT(A)-10, KOLKATA OF DATED 30.10.2015 RE LATING TO A.Y.2008-09, 2009-10 AND 2010-11. 2. ITA NO.6/KOL/2016 FILED BY THE REVENUE IS AG AINST THE ORDER DATED 30.10.2015 OF CIT(A)-10, KOLKATA RELATING TO A.Y.2007-08. 3. AS FAR AS ITA NO.6/KOL/2016 TO 9/KOL/2016 WH ICH ARE APPEALS FILED BY THE REVENUE FOR A.Y.2007-08 TO 2010-11 ARE CONCERNED IT WAS AGR EED BY THE PARTIES AT THE TIME OF HEARING THAT THE TAX EFFECT IN THESE FOUR APPEALS B Y THE REVENUE ARE BELOW RS.10 LAKHS. 2 ITA NOS.24-26/KOL/2016 AND 6 TO 9/KOL/2016 SHRI RAJESH AGARWAL A.YR.2007-08 TO 2010-11 2 4. THE CBDT HAS ISSUED CIRCULAR NO. 21/2015, D ATED 10TH DECEMBER, 2015, WHEREBY THE MONETARY LIMITS FOR FILING OF APPEALS BY THE DE PARTMENT BEFORE INCOME TAX APPELLATE TRIBUNAL AND HIGH COURTS AND SLP BEFORE SUPREME COURT HAVE BEEN INCREASED AS MEASURE FOR REDUCING LITIGATION. THE REVISED MONETARY LIMITS LAID DOWN IN PARA-3 OF THIS CIRCULAR AND THE MANNER OF COMPUTING TAX EFFECT AS LAID DOWN IN PARA-4 OF THIS CIRCULAR ARE AS FOLLOWS: 3. HENCEFORTH, APPEALS/ SLPS SHALL NOT BE FILED I N CASES WHERE THE TAX EFFECT DOES NOT EXCEED THE MONETARY LIMITS GIVEN HEREUNDER: - SL. NO. APPEALS IN INCOME-TAX MATTERS MONETARY LIMIT (IN RS) 1. BEFORE APPELLATE TRIBUNAL 10,00,000/- 2. BEFORE HIGH COURT 20,00,000/- 3. BEFORE SUPREME COURT 25,00,000/- IT IS CLARIFIED THAT AN APPEAL SHOULD NOT BE FILED MERELY BECAUSE THE TAX EFFECT IN A CASE EXCEEDS THE MONETARY LIMITS PRESCRIBED ABOVE. FILIN G OF APPEAL IN SUCH CASES IS TO BE DECIDED ON MERITS OF THE CASE. 4. FOR THIS PURPOSE, 'TAX EFFECT' MEANS THE DIFFERE NCE BETWEEN THE TAX ON THE TOTAL INCOME ASSESSED AND THE TAX THAT WOULD HAVE BEEN CH ARGEABLE HAD SUCH TOTAL INCOME BEEN REDUCED BY THE AMOUNT OF INCOME IN RESPECT OF THE ISSUES AGAINST WHICH APPEAL IS INTENDED TO BE FILED (HEREINAFTER REFERRED TO AS 'D ISPUTED ISSUES'). HOWEVER THE TAX WILL NOT INCLUDE ANY INTEREST THEREON, EXCEPT WHERE CHAR GEABILITY OF INTEREST ITSELF IS IN DISPUTE. IN CASE THE CHARGEABILITY OF INTEREST IS T HE ISSUE UNDER DISPUTE, THE AMOUNT OF INTEREST SHALL BE THE TAX EFFECT. IN CASES WHERE RE TURNED LOSS IS REDUCED OR ASSESSED AS INCOME, THE TAX EFFECT WOULD INCLUDE NOTIONAL TAX O N DISPUTED ADDITIONS. IN CASE OF PENALTY ORDERS, THE TAX EFFECT WILL MEAN QUANTUM OF PENALTY DELETED OR REDUCED IN THE ORDER TO BE APPEALED AGAINST. 5. IN PARA-10 OF THE SAID CIRCULAR IT HAS FURTHER BEEN CLARIFIED THAT THE REVISED MONETARY LIMITS WILL APPLY RETROSPECTIVELY. THE RE LEVANT PARA-10 OF THE CIRCULAR READS THUS: 10. THIS INSTRUCTION WILL APPLY RETROSPECTIVELY TO PENDING APPEALS AND APPEALS TO BE FILED HENCEFORTH IN HIGH COURTS/ TRIBUNALS. PENDING APPEALS BELOW THE SPECIFIED TAX LIMITS IN PARA 3 ABOVE MAY BE WITHDRAWN/ NOT PRESSE D. APPEALS BEFORE THE SUPREME COURT WILL BE GOVERNED BY THE INSTRUCTIONS ON THIS SUBJECT, OPERATIVE AT THE TIME WHEN SUCH APPEAL WAS FILED. 3 ITA NOS.24-26/KOL/2016 AND 6 TO 9/KOL/2016 SHRI RAJESH AGARWAL A.YR.2007-08 TO 2010-11 3 6. IN THE PRESENT CASE, THE TAX EFFECT IN ALL THE APPEALS BY THE REVENUE IS LESS THAN RS.10,00,000/-. THIS APPEAL HAD BEEN FILED BY THE REVENUE ON 1.1.2016 AFTER THE DATE OF CIRCULAR REFERRED TO ABOVE. 7. IT IS A SETTLED LAW THAT THE CIRCULARS ISSUED BY CBDT ARE BINDING ON THE REVENUE. THIS POSITION WAS CONFIRMED BY THE APEX COURT IN T HE CASE OF COMMISSIONER OF USTOMS VS INDIAN OIL CORPORATION LTD. REPORTED IN 267 ITR 272 WHEREIN THEIR LORDSHIPS EXAMINED THE EARLIER DECISIONS OF THE APEX COURT WI TH REGARD TO BINDING NATURE OF THE CIRCULAR AND LAID DOWN THAT WHEN A CIRCULAR ISSUED BY THE BOARD REMAINS IN OPERATION THEN THE REVENUE IS BOUND BY IT AND CANNOT BE ALLOW ED TO PLEAD THAT IT IS NOT VALID OR THAT IT IS CONTRARY TO THE TERMS OF THE STATUTE. THE APP EAL UNDER CONSIDERATION HAS CERTAINLY BEEN FILED CONTRARY TO THE CIRCULAR ISSUED BY THE C BDT CIRCULAR NO.21 DATED 10.12.2015. 8. IN VIEW OF THE ABOVE, WE HOLD THAT THE APPEAL FI LED BY THE DEPARTMENT, AGAINST THE IMPUGNED ORDER OF THE LD. CIT(A), IS CONTRARY T O THE POLICY DECISION OF THE DEPARTMENT AND AS SUCH THE APPEAL FILED BY THE DEPA RTMENT IS DISMISSED IN LIMINE . 9. IN THE RESULTS ALL THE APPEALS BY THE REVE NUE ARE DISMISSED. 10. AS FAR AS ITA NOS. 24/KOL/2016 TO 26/KOL/20 16 ARE CONCERNED, THESE ARE APPEALS FILED BY THE ASSESSEE FOR A.Y.2008-09, 2009-10 AND 2010-11. THE ONLY COMMON ISSUE THAT ARISES FOR CONSIDERATION IN THESE APPEALS BY T HE ASSESSEE IS AS TO WHETHER CIT(A) WAS JUSTIFIED IN ESTIMATING THE INCOME OF THE ASSES SEE BY APPLYING THE PROFIT RATE OF 10% OF THE TURNOVER OF CONTRACTUAL RECEIPTS. THE FACTS AND CIRCUMSTANCES UNDER WHICH THESE APPEALS ARISE FOR CONSIDERATION ARE IDENTICAL. 11. THE ASSESSEE IS AN INDIVIDUAL. HE DERIVES I NCOME FROM CARRYING OUT CONSTRUCTION ACTIVITIES AND ALSO ACTING AS LABOUR CONTRACTOR. TH E ASSESSMENT FOR ALL THE THREE ASSESSMENT YEARS WERE MADE U/S 143 (3) R.W.S. 147 O F THE INCOME TAX ACT, 1961 (ACT). THE ASSESSMENTS WERE REOPENED FOR THE REASON THAT I N THE COURSE OF EXAMINING THE ASSESSMENT RECORDS FOR A.Y.2011-12 AND ALSO BASED O N THE INFORMATION AVAILABLE IN 26AS DETAILS, IT TRANSPIRED THAT THE ASSESSEE HAD C ONTRACTUAL RECEIPTS FROM EXECUTING 4 ITA NOS.24-26/KOL/2016 AND 6 TO 9/KOL/2016 SHRI RAJESH AGARWAL A.YR.2007-08 TO 2010-11 4 CONTRACTS AND ALSO RENTAL INCOME FOR THREE ASSESSME NT YEARS SET OUT ABOVE WHICH HAD NOT BEEN DISCLOSED IN THE RETURN OF INCOME. IT IS ON TH E BASIS OF SUCH INFORMATION THAT REASSESSMENT PROCEEDINGS U/S 147 OF THE ACT WERE IN ITIATED FOR ALL THE THREE ASSESSMENT YEARS SET OUT ABOVE. IN THE COURSE OF REASSESSMENT PROCEEDINGS THE AO NOTICED THAT IN SUPPORT OF THE INCOME DECLARED BY THE ASSESSEE IN T HE RETURN OF INCOME FROM CONTRACT BUSINESS, THE ASSESSEE HAD FILED PROFIT AND LOSS A CCOUNT AND COULD NOT EXPLAIN THE RECEIPTS AND EXPENSES AS SHOWN IN THE SAID ACCOUNT TO JUSTIFY THE PROFIT DECLARED FROM CONTRACTUAL BUSINESS. THE AO THEREFORE REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED THE INCOME OF THE ASSESSEE ON CONTRACT BUSINESS BY APPL YING THE PROFIT RATE OF 12%. THE PERCENTAGE OF THE PROFIT DECLARED BY THE ASSESSEE I N THE RETURN OF INCOME WAS 4.7% OF THE TURNOVER IN A.Y.2008-09 AND 7.7% IN A.Y.2009-10 AND 5.8% IN A.Y.2010-11. CONSEQUENT TO THE ESTIMATION OF INCOME AS MADE ABOV E A SUM OF RS.20,33,530, RS.10,95,650/- AND RS.15,12,518/- WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE BY THE AO. 12. ON APPEAL BY THE ASSESSEE THE CIT(A) REDUCE D THE ESTIMATION OF INCOME AS MADE BY THE AO FROM 12% TO 10%. THE ASSESSEE HAD SUBMITT ED BEFORE CIT(A) THAT HE WAS NOT A PROFESSIONAL ENGINEER OR AN ARCHITECT AND BY HIS HARD WORK AND LABOUR HE STARTED AND FLOURISHED IN HIS BUSINESS. THE ASSESSEE SUBMITTED THAT ESTIMATION OF INCOME AT 12% WAS WITHOUT ANY BASIS. THE ASSESSEE ALSO SUBMITTED THAT THE PROFIT DECLARED BY THE ASSESSEE IN A.Y.2007-08 AT 15% OF THE TURN OVER WAS BECAUSE OF THE LOWER QUANTUM OF TURN OVER DECLARED IN THAT YEAR. THE ASSESSEE ALSO SUBMITTED THAT THE TURN OVER IN A.Y.2007-08 WAS RS.37,70,700/- AND IT GREW IN A.Y.2008-09 TO RS.2.7 7 CRORES. THE ASSESSEE PLEADED THAT IT HAD TO COMPROMISE ON THE PROFIT MARGIN IN VIEW O F THE HIGHER VOLUME OF BUSINESS. 13. THE CIT(A) ON CONSIDERATION OF THE ABOVE SUBMI SSIONS WAS OF THE VIEW THAT ENDS OF JUSTICE WOULD BE MET IF THE PROFIT RATE OF 10% PROF IT TO THE TURN OVER I.E. CONTRACTUAL RECEIPTS IS APPLIED AND THE INCOME OF THE ASSESSEE DETERMINED ACCORDINGLY. 5 ITA NOS.24-26/KOL/2016 AND 6 TO 9/KOL/2016 SHRI RAJESH AGARWAL A.YR.2007-08 TO 2010-11 5 14. STILL AGGRIEVED THE ASSESSEE IS IN APPEAL B EFORE THE TRIBUNAL. THE LD. COUNSEL FOR THE ASSESSEE GAVE THE FOLLOWING DETAILS WITH REGARD TO THE ASSESSEES TURN OVER AND PROFITS DECLARED BY THE ASSESSEE AND THE INCOME EST IMATED BY THE AO AND THE PROFITS ULTIMATELY DETERMINED BY CIT(A). ASST. YEAR 2008-09 TOTAL TURNOVER : RS.2,77,31,306/- N.P.SHOWN : RS.12,94,226/- % : 4.7% ASST. YEAR 2008-09 TOTAL TURNOVER : RS.1,51,94,329/- N.P.SHOWN : RS.11,83,485/- % : 7.7% ASST. YEAR 2008-09 TOTAL TURNOVER : RS.2,46,80,164/- N.P.SHOWN : RS.14,49,102/- % : 5.8% 15. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THOUGH THE TURN OVER OF THE ASSESSEE IS MORE THAN RS.40 LAKHS, YET KEEPING IN MIND THE F ACTS AND CIRCUMSTANCES OF THE PRESENT CASE THE ESTIMATION OF PROFIT OF THE ASSESSEE SHOUL D BE MADE ON THE BASIS OF THE PRESUMPTIVE RATE OF PROFIT OF 8% AS SET OUT U/S 44A D OF THE ACT. IT IS AN ADMITTED POSITION THAT FOR THE RELEVANT PERIOD THE LIMIT OF TURN OVER FOR APPLICATION OF SECTION 44AD OF THE ACT WAS RS.40 LACS AND BELOW AND THERE FORE THE SAID PROVISIONS ARE NOT APPLICABLE TO THE ASSESSEE. YET THE PRAYER WAS MADE TO APPLY THE AFORESAID PROVISION KEEPING IN MIND THE BACKGROUND OF THE ASSESSEE WHO OPERATES IN AN UNORGANIZED SECTOR WITHOUT A PROFESSIONAL QUALIFICATION. THE LD. DR RE LIED ON THE ORDER OF CIT(A). 16. AFTER CONSIDERING THE RIVAL SUBMISSIONS, W E FIND THAT THERE IS NO BASIS FOR ESTIMATION OF PROFITS AS DONE BY THE AO AND AS DONE BY CIT(A). GENERALLY WHEN THE BOOKS OF ACCOUNTS ARE REJECTED, THE PAST HISTORY OF THE ASSESSEE IS THE BEST YARDSTICK TO ESTIMATE THE INCOME. IN THE PRESENT CASE HOWEVER TH E PAST HISTORY CANNOT BE ADOPTED FOR THE REASON THAT THE VOLUME OF BUSINESS OF THE ASSES SEE HAS GROWN SUBSTANTIALLY. WE FIND 6 ITA NOS.24-26/KOL/2016 AND 6 TO 9/KOL/2016 SHRI RAJESH AGARWAL A.YR.2007-08 TO 2010-11 6 MERIT IN THE SUBMISSION OF THE ASSESSEE THAT THE CA PITAL OUTLAY OF THE ASSESSEE REMAINS THE SAME AND THE ASSESSEE IN ORDER TO ACHIEVE HIGHER TU RNOVER IT HAD TO COMPROMISE ON ITS MARGIN. KEEPING IN MIND ALL THESE ASPECTS, WE ARE O F THE VIEW THAT IT WOULD BE JUST AND APPROPRIATE THAT THE INCOME OF THE ASSESSEE BE DETE RMINED BY APPLYING THE RATE OF 8% OF THE TOTAL TURNOVER I.E. CONTRACTUAL RECEIPTS INSTEA D OF 10% ADOPTED BY CIT(A). THUS THE APPEALS OF THE ASSESSEE ARE TREATED AS PARTLY ALLOW ED. 17. IN THE RESULT THE APPEALS BY THE REVENUE ARE DISMISSED AND THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE COUR T ON 04.10.2017. SD/- SD/- [M.BALAGANESH] [ N.V.V ASUDEVAN ] ACCOUNTANT MEMBER JUDI CIAL MEMBER DATED : 04.10.2017. [RG PS] COPY OF THE ORDER FORWARDED TO: 1. SHRI RAJESH AGARWAL, 67, SHREEDHAR ROY ROAD, KOL KATA-700039. 2. I.T.O. WARD-36(1), KOLKATA. 3. C.I.T.(A)-X, KOLKATA 4. PR.C.I.T.-12, KOL KATA. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVATE SECR ETARY HEAD OF OFFICE/ D.D.O., ITAT KOLKATA BENCHES 7 ITA NOS.24-26/KOL/2016 AND 6 TO 9/KOL/2016 SHRI RAJESH AGARWAL A.YR.2007-08 TO 2010-11 7